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South Asia Investor Review is focused on reporting, analyzing and discussing the economy and the financial markets of countries in South Asia, including Pakistan, Bangladesh and Sri Lanka. For investors looking to invest in emerging markets beyond BRIC countries (Brazil, Russia, India and China), this blog is designed to help international investors looking to learn about investing in South Asia with focus on Pakistan. Riaz has another blog called Haq's Musings at http://www.riazhaq.com

Cricket's "Big 3" Power Grab Defies Established Sports Economics

Australia, England and India, the three biggest revenue producing nations in the world of cricket, are seeking to remodel International Cricket Council (ICC) along the lines of the UN Security Council. They are making a naked bid to get more money and power for themselves at the expense of the cricket boards of the rest of the ICC member nations including Bangladesh, New Zealand, Pakistan, South Africa, Sri Lanka, West Indies and Zimbabwe.

The "Big 3" Proposal:

The proposals, written by the ICC's Finance, Commercial Affairs (FCA) committee and leaked to the media last week, calls for the formation of a four-person executive committee, on which the representative of boards of Australia, England and India would be guaranteed a seat. Only one representative from the rest of the cricketing nations combined would be selected by the three boards annually.

Would this proposal, if adopted as is, strengthen the sport of cricket? Or would it spell doom for it? Its proponents argue that the new structure would improve governance of world cricket. Cricket Australia Chairman Wally Edwards said " its approach internationally is consistent with its approach at home where we have made significant strides improving the governance of Australian cricket".

“It’s a cartel, an unholy trinity and it threatens the future of the game. I’m serious. How can it possibly be good for the other Test playing nations and the associate members that these three line their own pockets. It is a scandal and it must be stopped.
“They are going to kill cricket with these proposals. Great, India and England and Australia can play themselves to their heart’s content but they have put every other nation on the bread line.”“They are saying they should have the power because they can bring greater stability but they don’t explain how they are going to do it. This is cloak and dagger stuff. Where’s the transparency? And then they say that each member will be given revenue share in line with the growth of the ICC. They are just lining their pockets". “You can read it yourself. It is clear in black and white. Section one, page three, point E and I’ll quote it ‘Ensuring a fair distribution of revenues, recognizing the contribution of each member to the ICC both on and off the field’. The key word there is ‘contribution’. Well, of course Indian ‘contribute’ more in terms of money than Zimbabwe. But this is totalitarian. This is about the rich getting richer and screw the rest".“Again, a little further down. Same section, same page but point f. ‘The need to streamline bilateral cricket arrangements and ensure the on-going relevance of all these matches to ICC events and the viability of cricket in all relevant markets’. Look, we all know what streamline means in this context. It’s reducing or getting rid all together.”

Successful NFL Model:

The world's most successful sports franchise today is the National Football League (NFL) in the United States. It treats all of its 32 member teams equally with equal vote in decision making. Over 70% of its revenue is shared equally among its member teams.

NFL has a highly lucrative business because of the extraordinary popularity of football in the United States. Over nine years, starting in 2014, CBS, Fox and NBC will together will pay an average of about $3 billion a year, more than 50 percent higher than their prior deals, according to a report in New York Times. Altogether, the four networks, in addition to DirecTV, which pays $1 billion a year for its Sunday Ticket satellite package, will pay the N.F.L. more annually in TV rights than any sports league has ever been paid.

Economics of Sports:

Simon Rottenberg, an economist at University of Chicago, published what is considered as the first significant paper on the subject of the economics of sport, "The Baseball Players' Labor Market" in 1956. He stressed the importance to sporting competition of uncertainty of outcome and distribution of talent: "The nature of the industry is such that competitors must be of approximately equal ‘size’ if any are to be successful; this seems to be a unique attribute of professional competitive sports." This ‘invariance principle’ was because a league in which the strong simply soaked up all the talent would defeat itself.

Summary:

The naked power grab by cricket boards of Australia, England and India is indeed an "Unholy Trinity". It defies the basic economics of sports as described by University of Chicago economist Simon Rottenberg. It results in unequal competition by weakening the majority of the national cricket teams by starving them of needed revenues to train, promote and reward the best and the brightest players. It will badly hurt international cricket. PCB and other cricket boards should strongly oppose it.

Comments

#Pakistan’s Road Warriors Are on Top of the #Cricket World http://www.nytimes.com/2016/08/26/sports/cricket/pakistan-cricket-road-warriors-on-top-of-the-world.html?_r=0

London — Pakistan’s seven-year road trip has reached a destination few had forecast: a first-time No. 1 ranking by the International Cricket Council for five-day test matches.

Pakistan has been unable to play home tests since Sri Lanka’s team was attacked by terrorists on its way to a match in Lahore in March 2009. But it took the top spot Monday, when the match of the previous leader, India, against West Indies was effectively rained out in Port of Spain, Trinidad.

“There is no greater feeling than to achieve the number-one ranking in the most traditional and purest format of the sport,” Pakistan’s captain, Misbah-ul-Haq, told the ICC’s website. “This is what cricketers play for and want to achieve in their own careers.”

Waqar Younis, coach of the team until April 2016 and one of the greatest bowlers in Pakistan history, proclaimed “a proud moment for the whole nation.” Pakistan has never previously headed the rankings, which were introduced in 2003, although a retrospective calculation has placed it hypothetically on top for a very brief period in 1988.

The ranking also represents a huge personal achievement for Misbah, at 42 the oldest active international cricketer. He has been captain since 2010, when he was recalled to a team that was in hopeless disarray after the spot-fixing scandals that led to the banning and imprisonment of three players, including his predecessor, Salman Butt.

“I would rather give full credit to Misbah, who has shown resilience against his critics and never spoken a harsh word when things were going wrong,” Waqar said, when asked by ESPN Cricinfo about his own contribution to Pakistan’s success. “His honesty and good intent have made a huge difference, His positive intentions and his characteristics are outstanding.”

Misbah has also excelled as a batsman, scoring more than 2,200 runs at an average of 55 runs per dismissal in the 25 matches since May 2013 that count in Pakistan’s ranking. He found a remarkable lieutenant in another veteran, the 38-year-old former captain Younis Khan, who has scored nearly 2,800 runs at an average of just under 63 and played 11 innings of 100 or more — culminating in 218 in the victory over England at the Oval in London earlier this month that gave Pakistan its shot at No.1.

His team has reflected Misbah’s durability and resilience. Some critics have suggested that Pakistan’s excellent record at its home in exile in the United Arab Emirates means it has suffered little disadvantage, but Misbah rebuffed that argument after the victory at the Oval.

“Living every day away from your family and friends and playing every game away from Pakistan is really difficult. It is mentally tough,” he told journalists. “I can see my mother only once a year. I only see my sister once a year. We are out of the country all of the time.”

Pakistan has continued to grow talent. When its leading spin bowler Saeed Ajmal was banned in 2014 because of questions about his bowling action, the team called up Yasir Shah, who had no test match experience but has since taken 95 wickets in 16 matches and briefly topped world bowling rankings.

Its players, including the veterans, have confounded a previous stereotype by getting fit. They attended military training camps before the tour of England and celebrated memorable moments such as victory in the first match of the series, at London’s storied Lord’s ground, with displays of push-ups.

Only #SriLanka comes to #India’s #BCCI support at the #ICC meeting roll back #BigThree http://indianexpress.com/article/sports/cricket/icc-bcci-big-three-only-sri-lanka-comes-to-indias-support-4508475/ … via @IndianExpress

With the majority of the International Cricket Council (ICC) board members voting in favour of a rollback of the structure under which India was to get the lion’s share of the revenue, the Board of Control for Cricket in India’s last ditch efforts to garner support failed.India managed to get the support of Sri Lanka but it was clear that the majority of the Test nations were not in favour of the Big Three structure.The two BCCI office bearers — treasurer Anirudh Chaudhry, joint secretary Amitabh Choudhary — who travelled to Dubai (the BCCI was represented by the Supreme Court-appointed administrator Vikram Limaye) for the ICC board meeting could not convince the other board members to defer the voting till April. The ICC will now pass the resolution during it’s next Board meeting in April.According to a BCCI official, India is hopeful of convincing two other members to support them before the resolution is passed during the next ICC Board meeting in April. The Big Three — in which India, Australia and England — were entitled to 27.4 per cent of the total revenue from 2015-2023 cycle with India getting 20.3 percent was proposed in 2014 by the then BCCI president N Srinivasan in 2014.

CRICKET’S global governing body has received a thumping mandate from its members to proceed with a broad restructure aimed at curbing the dominance of the “Big Three” — Australia, India and England.The sweeping changes were passed in a unanimous vote during a meeting at the International Cricket Council (ICC) headquarters in Dubai, the governing body said in a statement Thursday.The shake-up amends the ICC’s constitution and financial structure so that revenue is more equitably distributed among members and less power is concentrated in the hands of the “Big Three”.It reverses a much-criticised ICC decision in 2014 to relinquish more control to Australia, England and India, the world’s most powerful cricketing boards.The restructure was agreed to in principle in February by the majority of Test playing nations — including England and Australia — but India opposed the proposal.The Board of Control for Cricket in India stands to lose $277 million revenue over the next eight years under the changes, with more flowing to minor Test nations and associate members like Ireland and Afghanistan.

t started with money, and it has ended with money. The "Big Three" financial model drawn up by the boards of India, England and Australia unveiled amid much consternation three years ago is no more, replaced by a plan to vastly reduce the BCCI's share of ICC revenue and offer identical amounts to seven of the game's Full Member nations.

After a week of intense negotiations that saw the BCCI's opposition to change outmaneuvered by the collective will of the rest, the amount of ICC revenue to be handed out to each nation is now as follows. The BCCI will receive US$293m across the eight-year cycle, the ECB US$143m, Zimbabwe Cricket US$94m and the remaining seven Full Members US$132m each. Associate Members will receive total funding of US$280m.

While this distribution is not a complete rollback to the equal funding from ICC events that Full Members used to receive, it is a considerable distance from the US$440 million the BCCI stood to earn under the Big Three model. The distribution to the ECB has reduced marginally from around $US150 million, while Cricket Australia's share is similar to what it previously received, albeit now in line with those afforded to South Africa, Pakistan, New Zealand, Sri Lanka, Bangladesh and West Indies. These changes were passed by 14 votes to one, with the BCCI the sole dissenter.

Battles over the ICC events financial model have been drawn out over a period of years, starting with the ascension of Shashank Manohar as the governing body's chairman following the exit of his predecessor and rival N Srinivasan, widely considered the Big Three's chief architect. Manohar stunned the cricket world by stating his intent to resign earlier this year, but was cajoled into staying on until the ICC annual conference in June, where the above changes are set to be ratified.

"This is another step forward for world cricket and I look forward to concluding the work at the Annual Conference," Manohar stated in an ICC release. "I am confident we can provide a strong foundation for the sport to grow and improve globally in the future through the adoption of the revised financial model and governance structure."

The governance structure of which Manohar spoke was the other major outcome from this week's round of meetings in Dubai. The ICC's constitution is to be extensively redrawn, with numerous changes to the way the global game is run and the way that the performance and eligibility of member nations are assessed. These constitutional changes, which were passed by 12 votes to two, include:

LAHORE: The Pakistan Cricket Board’s (PCB) annual budget to the tune of Rs 4.5 billion (US$ 43 million) has been approved by its Board of Governors (BoG). Talking to reporters after the BoG meeting, PCB chairman Shaharyar Khan claimed that almost all short-term and long-term plans envisaged by the PCB in the wake of poor performance of the Pakistan team during the last World T20 and Asia Cup T20 had been implemented in order to resurrect the game of cricket in the country. Shaharyar said though the budget amounting to Rs 4.5 billion was approved, the PCB would try its level best to reduce its expenditure. “There was extensive debate on the budget but finally it was approved,” he said. Shaharyar said that after the disappointing performances in the last Asia Cup T20 and World T20, the PCB had taken several decisions to bring back Pakistan cricket on the right track. “We informed the BoG that short-term plans have fully been implemented, since a new selection committee has been formed by appointing Inzamamul Haq as the new chief selector, apart from replacing Shahid Afridi with Sarfraz Ahmad as T20 captain and relieving Waqar Younis to hire Mickey Arthur as head coach,” added the PCB chief. “And to bring improvement in fitness, a boot camp was held successfully in Kakul recently. Also, we have received reports that the camp in Abbottabad was very successful due to which it has now been decided that such camps will be held every year to promote fitness culture,” Shaharyar further said.

Talking about the PCB long-term plans, the chairman said: “Under the long-term plans 95 percent work has been completed with Mudassar Nazar being appointed as director academies. He will join the academy from Tuesday (tomorrow). Mudassar, the chairman said, was a very experienced and suitable person to run the academies, adding that the director academies would also set up new academies across the country. He said that separate school, club and university cricket programmes had almost been finalized, adding that around 1,000 schools both from private and government sectors would be competing which would help enhance the base of players to 10,000. “The PCB is trying to get sponsors for the regional bodies too.” The BoG also welcomed newly appointed head coach Mickey Arthur and had asked the PCB to fully support him.

Shaharyar also said the BoG decided that coaches, trainers, players and other support staff of the national team would be given reasonable targets to achieve in the six-month time period. “After every six months, the target will be reviewed in order to analyze the performances. However, there will be no action against anyone if the targets are not achieved,” he pointed out. Nonetheless, fresh targets will be given as part of a review course. Similarly, head coach Arthur will also be given targets.

He said the BoG admitted that the standard of pitches and grounds in Pakistan was not matching up to the international standard. “The BoG has vowed to give special attention to bringing improvements in pitches and grounds. Our pitches are dull and not up to the mark. All over the world the ball carries to the chest level of the wicketkeeper at fast tracks but we hardly observe such things in Pakistan,” he lamented.

Talking about changes in the domestic structure which could not be put on the right track even after many decades, the chairman said that now it was decided that eight teams each of regions and departments would play separately in the National One-day Championship. “In the four-day format, there won’t be any change. T20 tournaments will only be held on regional level.” The decisions, said the chairman, aimed at improving the quality of the domestic cricket.

Pakistan Super league (PSL) chairman Najam Sethi on Tuesday disclosed that a profit of US$2.6 million was made on the first edition of the league and termed it as “a great achievement for the Pakistan Cricket Board (PCB)”.While the PCB BoG was reluctant to give Sethi the green light as they feared huge losses on a heavy investment, the profit earned now means Sethi has cemented his place as PSL chairman.

“I promised I will disclose details of the PSL funds,” he said. “We were successful in every aspect — the ratings were high, thanks to our state-of-the-art production, while our upcoming players got an opportunity to rub shoulders with the top players in the world.

“Furthermore, we sold our franchises for US$9.3 million, US$3 million more than we’d earlier predicted.”

He said while the league wasn’t able to meet the targets of gate money (US$6 million to US$7.5 million), they made good money through the broadcast of the event after buying the airtime of three television channels. “We expected broadcasting rights to sell to the tune of US$15 million but it all went wrong after Ten Sports offered just US$2 million, which persuaded the PSL to make their own production arrangements.

“We earned US$9 million from the broadcast of the league,” he said.

SIXTH FRANCHISE

Sethi added that the PCB BoG had allowed the PSL to include a sixth franchise from the next edition even through there were “objections from the other five franchises” but “they could be convinced”.

“Although we had decided to include a sixth team from 2018, looking at the success of the inaugural edition, the BoG members have allowed us to induct a sixth team from 2017,” he said.

Pakistan was the among the last Test playing nations to host a T20 league, but still attracted some big name including Shane Watson, Dwayne Smith and Chris Gayle in the first season, and a whole lot of viewership from the nation’s cricket fans.In the IPL, a team can acquire players through five ways: annual auction, signing domestic players, signing uncapped players, trading players, and signing replacements. PSL, on the other hand, holds a draft where players are categorized in five groups – Diamond, Silver, Platinum, Gold and Emerging.

Since its inception in 2008, the Indian Premier League has had at least eight teams in every season. The PSL on other hand, has just five teams - Peshawar Zalmi, Islamabad United, Lahore Qalandars, Quetta Gladiators and Karachi Kings.The IPL has always boasted of encouraging young cricketing talent from around the nation, and allows no more than ten overseas players out of the maximum of 27. The Pakistani league on the other hand, has a restriction of only four foreign players and a minimum of 12 local ones.Duration of TournamentsThe Pakistan Super League comprises just 24 matches, with each team playing the other twice. Therefore, the event ends in less than a month. The IPL on the other hand goes on for over a month, keeping the audiences engaged for a longer period. This year the IPL season will start on 5 April and end on 21 May while PSL will go on from 9 February to 7 March.Monetary ComparisonThe winners of the 2016 IPL got a staggering Rs 20 crore ($ 3 million), an amount that was the total prize money in its first edition. The PSL on the other hand, offered a million dollars in total as the prize money in its first edition.Even during their respective first teams auctions, the total money generated in the IPL was $723.5 million as opposed to PSL’s $18.6 million.

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Cloudcade:

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I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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